03. You borrow $5000 today. The loan is due in 5 years, with interest at ji = 7%. It is agre that you can instead pay $1000 one year from now, $X two years from now and $2000 thre years from now. If money is worth j4 = 8%, what is the value of X?

03. You borrow $5000 today. The loan is due in 5 years, with interest at ji = 7%. It is agre that you can instead pay $1000 one year from now, $X two years from now and $2000 thre years from now. If money is worth j4 = 8%, what is the value of X?

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 9EB: If you invest $15,000 today, how much will you have in (for further instructions on future value in...

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Concept explainers

Present Value

Present value (PV) is defined as the current or present value of all future sums of cash flow or money at a specified rate of return. This rate of return is known as the discounted rate, which is essentially the interest rate, discounted over some time. The expected cash flows are discounted at a discount rate to compute the present value. The higher the discount rate, the higher the future value (FV), but the lower the present value.

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Q3. You borrow $5000 today. The loan is due in 5 years, with interest at ji = 7%. It is agreed
that you can instead pay $1000 one year from now, $X two years from now and $2000 three
years from now. If money is worth j4= 8%, what is the value of X?

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